Key Point

The Court of Appeal has overturned a first instance decision (discussed in our April 2014 Update) that the Companies Court should not normally make an order upon a winding up petition based on tax assessments that are under appeal.

The Facts

HM Revenue & Customs presented a winding up petition against Changtel Solutions UK Limited (formerly ENTA Technologies Limited) (“ENTA”) founded on 36 unpaid VAT assessments. ENTA had appealed the assessments to the First-tier Tribunal (Tax Chamber). As a matter of law the mere existence of an assessment creates a statutory debt which remains extant until any appeal to the tax tribunal is successful and the assessment is cancelled.


The Court of Appeal decided that the first instance judge had incorrectly abrogated the jurisdiction of the Companies Court to take a view on whether the assessments were disputed in good faith leaving that question to the Tax Chamber.


The decision is good news for HMRC who in practice often use winding up petitions to "enforce" tax assessments. The Court of Appeal thought that the fact the Tax Chamber had the power under rules to dismiss appeals against assessments where it considered there was no reasonable prospect of success did not mean it was the only forum in which that question or ones connected with it could properly be considered. It stated there were many reasons why a Court might still exercise its discretion to make a winding up order even though tax assessments were subject to an appeal.